GCC construction boom 'hits basic resources'
Manama, June 11, 2008
The enormous growth in the construction industry across the GCC has put a tremendous strain on basic resources, mainly building materials, equipment and labour.
According to Meed, the business intelligence group, the total value of current projects in the region is $1.3 trillion, with Saudi Arabia accounting for 25 per cent.
The massive demand has led to a sharp increase in construction costs, which local analysts have noted is costing contractors in Saudi Arabia an average of a 20 per cent loss in revenue on their projects.
'The onus is really on the contractors of mega projects to partner with capable suppliers who are able to provide effective and reliable solutions as they continuously face pressure to deliver on their huge fast-track projects,' said Saudi Readymix marketing and business development manager, Fadi Mujahed.
'Specifically, they are looking for suppliers who would share, if not eliminate, the burden of ordering and receiving the required quantities of resources on time.'
'Ready-mixed concrete is a prime example of this because it cannot be ordered all at once and stored like other building materials such as steel, wood and blocks. Thus, securing the required quantities is a daily issue for project managers.'
'The key question most contractors in Saudi Arabia must ask themselves then is, how do we ensure a reliable and adequate supply of essential resources from suppliers in order to deliver on time?'
This availability of resources directly impacts contractor profit, as project owners and investors are imposing strict financial penalties on contractors who deliver late in order to protect their sizeable investments, Mujahed said.
He said that over the next five years, large and mega projects alone in Saudi Arabia will require an estimated 52 million tonnes of cement.
This staggering figure, which he believes will continue to increase as more mega projects are announced, is causing a shift in perspective where reliable suppliers are now viewed as full-time partners critical to project success.
'When we sign a contract and establish the timeline and the deliverables, we agree to strict delivery schedules,' said Consolidated Contractors Company (CCC) general construction manager Mohammed Al Ramahi.
'If a deadline passes us by without us having met the stated deliverables, we can face liquidated damages of up to 10pc of the total value of the project,' he said.
'And with the size and cost of the projects today, the incentive to deliver on time every time is definitely there. The issue becomes the ability to meet project requirements while maintaining a consistently high level of quality and this is why partnering with a trusted and reliable supplier is so important.'-TradeArabia News Service